The 8 Myths of Estate Planning
The Good & The Bad
The bad news? There is almost nothing “simple” about your estate plan.
The good news? Our experts are here to guide you through the process. In this article, we’re debunking eight myths about estate planning that we hear from our clients all the time.
Myth #1: When I update my will, everything else is automatically updated.
Unfortunately, simply updating your will after a life event doesn’t trigger automatic updates to all of your other legal documents. You’ll need to make sure each one, such as your Power of Attorney, is updated with the new information.
Most common oversight? Forgetting to change beneficiary designations on life insurance polices.
Myth #2: When I give my son access to my bank account, he can only use the money to pay for my medical expenses.
That’s what you hope will happen, and it probably will because he’s a responsible person. But legally, he has a right to use money for any purpose if he’s an owner on the account.
Myth #3: A Power of Attorney is still effective after a person dies.
Many of our clients believe that the rights given in a Power of Attorney continue after a person dies – this is untrue. Powers of Attorney automatically end when the person signing it, the principal, dies.
Myth #4: The more money I have, the more difficult my estate plan will be to execute.
The level of difficultly to wrap up your financial affairs is directly related to how complex it is and not to the amount of money you have. For example, consider the two situations below:
- $100,000 Estate – This person has property in two states, bank accounts at two different banks, CDs and investment accounts with several financial institutions and three children and five grandchildren.
- $1,000,000 Estate – This person has a home, one brokerage account and one child.
While the million-dollar estate contains more money, it will be much easier to execute because there are fewer financial organizations and people involved.
Myth #5: Executing an estate plan can be done quickly.
“Quickly” is a relative concept. Think months, not days. If estate taxes are owed, you’re probably looking at a year or more.
Myth #6: All states follow the same probate laws.
There is no “federal” probate law. Every state has it’s own probate process, even though many laws are similar.
Myth #7: Only the federal government taxes you upon death.
Yes, the federal government taxes you when you die, but so does your state of residency. In addition, it’s important to know the specific death tax rate for your state as it may different from the federal rate. Make sure to check the death tax rate for your state and adjust your estate plan accordingly.
Myth #8: My child or grandchild with special needs can inherit money and still keep his or her government benefits.
Children and grandchildren with special needs can be a complicated area of estate planning. If your estate plan is not set up correctly and your special needs child or grandchild receives an inheritance, he or she could lose her or her government benefits and assistance.
Having a properly set up supplemental needs trust as part of your estate plan can solve this problem. Ask your lawyer about this technique.
Want to know more?
Do you have other questions about estate planning? Is there a “myth” you’ve heard that’s not on our list? Contact our Trust Department to schedule an appointment to learn about how we can help with your estate plan.
- By phone: (507) 457-1113
- By email: firstname.lastname@example.org